31 January, 2019

Brussels, 31 January 2019 – European providers of digital networks and services are an engine of economic and societal growth and the sector is undergoing a major transformation fuelled by 5G and IoT platforms. However, Europe must address major strategic challenges related to the pace of network investment, market conditions, spectrum availability and regulatory context.

These are some of the key findings of the first “State of Digital Communications” Report, launched today by ETNO, Europe’s leading telecoms association, and prepared by leading research firm Analysys Mason.

Society, economy, users: telecoms are delivering

The report finds that leading European telcos have created a yearly value-added of €139.4bn and paid over €42bn in taxes (2017). At the same time, they delivered on key digital enablers: Europe enjoys high broadband coverage (97%), speeds higher than the global average (70.5MB for fixed, 34.9MB for mobile) and a vibrant infrastructure competition landscape.

Investment remains a strategic challenge

Data shows that investment per capita in Europe (€83.2) is less than half than in Japan (€188.5) and lower than in the USA (€135.3). Similarly, our Continent uses – and spends less on – telecom services, with the European spend per capita at €30.1, as opposed to over €70 in the USA and €52 in Japan. A healthier sector would deliver a faster roll-out, which is in the strategic interest of Europe, at a time in which 5G is becoming the springboard of industrial transformation.

IoT, verticals & 5G: a new telecom paradigm

The report finds that 5G is well underway, with dramatic enhancements to broadband and a new paradigm for network-based collaboration in sight. 5G means networks will play a new, central role in the industrial value chains. Already today, telecoms are putting forward diverse business offers that include a wealth of IT services such as cloud, security or enterprise services. Similarly, IoT revenues continue expanding and are expected to reach €5.2bn in 2025.

Spectrum: alarm bell on auctions and pricing

Spectrum is a crucial enabler for the mobile component of 5G networks. As of today, according to Analysys Mason data, only 6 European countries have concluded auctions for the 700MHz band, only 2 for the mmWave band and only 7 for the C-Band. In addition, there are concerning discussions on licence conditions, including on spectrum reservations, national roaming and other key aspects. This leads to legal uncertainty, which is highly problematic as it creates market distortions and has chilling effects on investment. Finally, the risk that 5G auctions are seen as a cash-cow to feed public budgets is concrete. The report finds that European telcos have already spent a total of €147.6bn in spectrum auctions for 3G and 4G cumulatively. The 5G auctions, while at the beginning, already resulted in a €12.4bn spend.

A new competitive scenario for policymakers

The report also shows a fast evolution of the competitive scenario. Telcos now face competition on 3 levels: on the top, from tech and internet companies; on the side, from alternative operators; and below, from new entities investing in pure fibre and adding to infrastructure competition.

This reality should be fully taken into account by policymakers and regulators, as it is of strategic relevance to ensure that Europe stays competitive in a digitally-enabled world.

Lise Fuhr, ETNO Director General, said: “Telcos are delivering a wealth of new services to both citizens and businesses, in the context of rapidly changing markets.A firmsupport from policymakers is essential: strong digital communications are about securing Europe’s place on the global stage”.

Rupert Wood, Research Director, Analysys Mason, said: “Past generations of wired or wireless connectivity have been treated as general-purpose underpinnings that drive socio-economic change by enabling new forms of interaction on top, typicallymonetisedby non-operators. 5G promises to integrate operators with the digital layer above by allowing diverse and demanding applications to access the exact type of connectivity they require, automatically and on-demand. With the right conditions for investment, this will have profound effects on many aspects of European life”.

Alessandro Gropelli is ETNO’s Director of Strategy and Communications. In this role, he is also Deputy to the Director General. He joined ETNO in 2013 and he is an expert of tech and telecoms policy. Alessandro is also a Member of the Board of GeSI, the Global e-Sustainability Initiative.

Prior to joining ETNO, Alessandro was European affairs advisor at Vodafone Group and vice-chairman at m-commerce working group of GSMA Europe. In 2010, he worked in the Brussels team of Telecom Italia. In 2009, as public relations officer at the European Parliament, he implemented the information campaign for the 2009 European Elections in Northern Italy.

He graduated in public management from Bocconi University in Milan (2009) and spent an exchange semester at the Hitotsubashi University of Tokyo (2008). More recently, he completed Executive Education courses at the MIT (2018) and Berkeley Haas (2016).

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About ETNO

ETNO is the European Telecommunications Network Operators’ Association. We proudly represent Europe’s main telecom operators, who innovate and invest in the continent's digital backbone. Our companies are the providers of Europe's most advanced digital networks and services. ETNO's mission is to develop a positive policy and regulatory environment empowering the delivery of world-class services for European citizens and businesses.